The tax year 2018 is more than 50 percent passed and there might be some changes that you need to make in the next few months to avoid any surprises.
Many of you will fall into using the new standard deduction instead of itemizing. The standard deduction is $12,000 Single or $24,000 Married. If your itemized deductions exceed the standard, then you will use the itemized deduction. The standard deduction increases $1,300 for everyone that is over the age of 65 or blind. The taxpayers that are working and are claimed as a dependent by another taxpayer only get a standard deduction of the greater of $1,050 or the sum of the $350 and the individual's earned income.
There are significant changes to the itemized deductions which include:
Medical and Dental expenses adjusted to 7.5% of Adjusted Gross Income.
State and Local taxes may not exceed $10,000.
Home Mortgage Interest deduction is limited to a loan balance of $750,000 on new loans and $1,000,000 on loans that were obtained prior to December 31, 2017. The new law extends to home-equity debt, which has been eliminated, unless the loan money is/was used to build or improve a principal or second home. The total loan balances may not exceed the $750,000 or $1,000,000 amount.
Charitable donations under the old tax code could not exceed 50% of your income. The new tax code allows the donation to be 60% of your income.
Job expenses and miscellaneous deductions subject to 2% of your Adjusted Gross Income have been eliminated. The expenses eliminated include: reimbursed business expenses, tools, dues, subscriptions, job search expenses and tax preparation fees.
Capital Gains rates remain unchanged under the new tax law.
Congress doubled the amount you can leave your heirs without having to pay federal estate taxes to $11,000,000. This means that a married couple could leave $22,000,000 to their hers. While this sounds great, once the couple becomes single, the amount drops to $11,000,000. The increase is scheduled to revert to earlier levels at the end of 2025.
There are a number of changes that I will let you know about in future writings, or you can contact us with any questions.